Australian motorists could be paying more at the petrol pump for years to come, with an energy expert warning the fallout from conflict in the Middle East could keep fuel prices elevated beyond 2030.
Speaking to Sunrise on Tuesday, John Blackburn AO, fellow at the Australian Institute of Energy, said the International Energy Agency (IEA) had predicted no change to fuel prices through 2027.
WATCH THE VIDEO ABOVE: High petrol prices to persist until 2030
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“When you look at the problems we have with oil, and separately the problems with diesel refining capacity, those prices aren’t going to come down for a long time,” he said.
“Depending on whether the war continues or there is some resolution, it is years for the oil supply chain refinery capacity to recover.
“During that period, people will want to restock the emergency stocks.
“This is a problem that goes way beyond 2030 in my view.”
Petrol prices in Australia remain about 65 cents a litre higher than they were in February, before the US and Israel went to war with Iran.
Oil prices hit a high of $US117 a barrel in April amid inflation and instability in the region.
John Blackburn, fellow at the Australian Institute of Energy, said it could take years for fuel prices to fall. Credit: SunriseBe the first to know: Add 7NEWS as your preferred news source on Google
Why fuel prices are staying high
While more oil is flowing into and out of the Middle East, Blackburn said the loss of refining capacity and the need to replenish emergency oil reserves would continue to put pressure on global fuel markets.
He said between 60 and 80 per cent of pre-war oil volumes were still coming out of the region, but the global supply of refined fuels remained under pressure.
“With the loss of refining capacity from the Middle East and the Russian War, that’s taking out something around about 60 per cent of the trade coming from those areas,” he said.
“Diesel prices, because of the lack of refining capacity will stay high.”
The distinction is important because crude oil must be processed at refineries before it can be turned into usable fuels such as petrol and diesel.
Even if more crude oil becomes available, reduced refining capacity can limit the supply of finished fuel, keeping prices high for consumers.
Blackburn said the loss of refining capacity would continue to put pressure on global fuel markets. Credit: Sunrise
The outlook is further clouded by fears of renewed conflict in the Middle East, with US President Donald Trump threatening further military action and the prospect of escalating hostilities involving Israel and Iran.
Blackburn said uncertainty over what happens next was keeping global markets on edge.
“Everybody’s incredibly on edge about this. In that period, prices stay high,” he said.
When will motorists see relief?
Even if the conflict ended immediately, Blackburn warned it would take considerable time for fuel markets to recover.
“If it did all end today, you’ve got wrecked infrastructure in a whole bunch of places that has to be rebuilt. They have to change how the oil market works, because refineries have adapted to a different type of oil where it wasn’t available in the Middle East,” he said.
“This is going to take quite a bit of time to sort out.
“The demand doesn’t go back to normal; it goes higher because people will want to restock the 400 million barrels of oil they released to the market. That means you’re going to have higher prices.”
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